[Federal Register Volume 89, Number 35 (Wednesday, February 21, 2024)]
[Notices]
[Pages 13128-13131]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-03454]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-99540; File No. SR-CboeEDGA-2024-005]


Self-Regulatory Organizations; Cboe EDGA Exchange, Inc.; Notice 
of Filing and Immediate Effectiveness of a Proposed Rule Change To 
Amend Its Fee Schedule

February 14, 2024.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on February 7, 2024, Cboe EDGA Exchange, Inc. (``Exchange'' or 
``EDGA'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been prepared by the Exchange. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Cboe EDGA Exchange, Inc. (the ``Exchange'' or ``EDGA'') proposes to 
amend its Fee Schedule. The text of the proposed rule change is 
provided in Exhibit 5.
    The text of the proposed rule change is also available on the 
Exchange's website (http://markets.cboe.com/us/equities/regulation/rule_filings/edga/), at the Exchange's Office of the Secretary, and at 
the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend its Fee Schedule applicable to its 
equities trading platform (``EDGA Equities'') by: (1) modifying the 
rate associated with fee code DQ; and (2) modifying certain Add/Remove 
Volume Tiers. The Exchange proposes to implement these changes 
effective February 1, 2024.\3\
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    \3\ The Exchange initially filed the proposed fee change on 
February 1, 2024 (SR-CboeEDGA-2024-004). On February 7, 2024, the 
Exchange withdrew that filing and submitted this proposal.
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    The Exchange first notes that it operates in a highly competitive 
market in which market participants can readily direct order flow to 
competing venues if they deem fee levels at a particular venue to be 
excessive or incentives to be insufficient. More specifically, the 
Exchange is only one of 16 registered equities exchanges, as well as a 
number of alternative trading systems and other off-exchange venues 
that do not have similar self-regulatory

[[Page 13129]]

responsibilities under the Securities Exchange Act of 1934 (the 
``Act''), to which market participants may direct their order flow. 
Based on publicly available information,\4\ no single registered 
equities exchange has more than 13% of the market share. Thus, in such 
a low-concentrated and highly competitive market, no single equities 
exchange possesses significant pricing power in the execution of order 
flow. The Exchange in particular operates a ``Taker-Maker'' model 
whereby it pays credits to members that remove liquidity and assesses 
fees to those that add liquidity. The Exchange's Fee Schedule sets 
forth the standard rebates and rates applied per share for orders that 
remove and provide liquidity, respectively. Currently, for orders in 
securities priced at or above $1.00, the Exchange provides a standard 
rebate of $0.00160 per share for orders that remove liquidity and 
assesses a fee of $0.0030 per share for orders that add liquidity.\5\ 
For orders in securities priced below $1.00, the Exchange does not 
assess any fees or provide any rebates for orders that add or remove 
liquidity.\6\ Additionally, in response to the competitive environment, 
the Exchange also offers tiered pricing which provides Members 
opportunities to qualify for higher rebates or reduced fees where 
certain volume criteria and thresholds are met. Tiered pricing provides 
an incremental incentive for Members to strive for higher tier levels, 
which provides increasingly higher benefits or discounts for satisfying 
increasingly more stringent criteria.
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    \4\ See Cboe Global Markets, U.S. Equities Market Volume 
Summary, Month-to-Date (January 26, 2024), available at https://www.cboe.com/us/equities/market_statistics/.
    \5\ See EDGA Equities Fee Schedule, Standard Rates.
    \6\ Id.
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Fee Code DQ
    The Exchange currently offers fee code DQ, which is appended to 
Midpoint Discretionary Orders (``MDOs'') \7\ using the Quote Depletion 
Protection (``QDP'') \8\ order instruction which add liquidity to the 
EDGA Book.\9\ QDP is designed to provide enhanced protections to MDOs 
by tracking significant executions that constitute the best bid or 
offer on the EDGA Book and enabling Users to avoid potentially 
unfavorable executions by preventing MDOs entered with the optional QDP 
instruction from exercising discretion to trade at more aggressive 
prices when QDP has been triggered.\10\ Currently, MDOs entered with a 
QDP instruction and which add liquidity to the EDGA Book are appended 
fee code DQ and assessed a fee of $0.0015 per share in securities at or 
above $1.00 and 0.30% of dollar value for securities priced below 
$1.00. The Exchange now proposes to amend the fee associated with fee 
code DQ from $0.0015 per share in securities at or above to $1.00 to 
$0.0018 per share. There is no proposed change in the fee assessed to 
securities priced below $1.00. The purpose of increasing the fee 
associated with fee code DQ is for business and competitive reasons, as 
the Exchange believes that increasing such fee as proposed would 
decrease the Exchange's expenditures with respect to transaction 
pricing in a manner that is still consistent with the Exchange's 
overall pricing philosophy of encouraging added liquidity.
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    \7\ See Exchange Rule 11.8(e).
    \8\ See Exchange Rule 11.8(e)(10).
    \9\ See Exchange Rule 1.5(d).
    \10\ See Securities Exchange Act Release No. 89016 (June 4, 
2020), 85 FR 35488 (June 10, 2020) (SR-CboeEDGA-2020-005) (``Notice 
of Filing of Amendment No. 1 and Order Granting Accelerated Approval 
of a Proposed Rule Change, as Modified by Amendment No. 1, to Amend 
the Rule Relating to MidPoint Discretionary Orders to Allow Optional 
Offset or Quote Depletion Protection Instructions'').
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Add/Remove Volume Tiers
    Under footnote 7 of the Fee Schedule, the Exchange currently offers 
various Add/Remove Volume Tiers. In particular, the Exchange offers 
three Remove Volume Tiers that each provide an enhanced rebate for 
Members' qualifying orders yielding fee codes N,\11\ W,\12\ 6 \13\ and 
BB \14\ where a Member reaches certain add volume-based criteria. The 
Exchange now proposes to modify the criteria associated with Remove 
Volume Tier 1 and Remove Volume Tier 2. The current criteria for Remove 
Volume Tiers 1-2 is as follows:
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    \11\ Fee code N is appended to orders that remove liquidity from 
EDGA in Tape C securities.
    \12\ Fee code W is appended to orders that remove liquidity from 
EDGA in Tape A securities.
    \13\ Fee code 6 is appended to orders that remove liquidity from 
EDGA in the pre and post market for securities listed on all tapes.
    \14\ Fee code BB is appended to orders that remove liquidity 
from EDGA in Tape B securities.
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    <bullet> Remove Volume Tier 1 provides an enhanced rebate of 
$0.0018 per share for securities priced at or above $1.00 to qualifying 
orders (i.e., orders yielding fee codes N, W, 6, or BB) where a Member 
adds or removes an ADV \15\ >=0.02% of the TCV.\16\
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    \15\ ``ADV'' means average daily volume calculated as the number 
of shares added to, removed from, or routed by, the Exchange, or any 
combination or subset thereof, per day. ADV is calculated on a 
monthly basis.
    \16\ ``TCV'' means total consolidated volume calculated as the 
volume reported by all exchanges and trade reporting facilities to a 
consolidated transaction reporting plan for the month for which the 
fees apply.
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    <bullet> Remove Volume Tier 2 provides an enhanced rebate of 
$0.0020 per share for securities priced at or above $1.00 to qualifying 
orders (i.e., orders yielding fee codes N, W, 6, or BB) where a Member 
adds or removes an ADV >=0.05% of the TCV.
    The proposed criteria for Remove Volume Tiers 1-2 is as follows:
    <bullet> Remove Volume Tier 1 provides an enhanced rebate of 
$0.0018 per share for securities priced at or above $1.00 to qualifying 
orders (i.e., orders yielding fee codes N, W, 6, or BB) where a Member 
adds or removes an ADV >=0.05% of the TCV.
    <bullet> Remove Volume Tier 2 provides an enhanced rebate of 
$0.0020 per share for securities priced at or above $1.00 to qualifying 
orders (i.e., orders yielding fee codes N, W, 6, or BB) where a Member 
adds or removes an ADV >=0.10% of the TCV.
    The Exchange believes that the proposed modifications to Remove 
Volume Tiers 1-2 will incentivize Members to add volume to and remove 
volume from the Exchange, thereby contributing to a deeper and more 
liquid market, which benefits all market participants and provides 
greater execution opportunities on the Exchange. While the proposed 
criteria is slightly more difficult to achieve than the current 
criteria, the Exchange believes that the criteria continues to be 
commensurate with the enhanced rebate offered by the Exchange for 
Members who satisfy the proposed criteria of Remove Volume Tiers 1-2 
and remains in-line with the criteria offered under Remove Volume Tier 
3.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Act and the rules and regulations thereunder applicable to the 
Exchange and, in particular, the requirements of Section 6(b) of the 
Act.\17\ Specifically, the Exchange believes the proposed rule change 
is consistent with the Section 6(b)(5) \18\ requirements that the rules 
of an exchange be designed to prevent fraudulent and manipulative acts 
and practices, to promote just and equitable principles of trade, to 
foster cooperation and coordination with persons engaged in regulating, 
clearing, settling, processing information with respect to, and 
facilitating transactions in securities, to remove impediments to and 
perfect the mechanism of a free and open market and a national market

[[Page 13130]]

system, and, in general, to protect investors and the public interest. 
Additionally, the Exchange believes the proposed rule change is 
consistent with the Section 6(b)(5) \19\ requirement that the rules of 
an exchange not be designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers as well as Section 6(b)(4) \20\ 
as it is designed to provide for the equitable allocation of reasonable 
dues, fees and other charges among its Members and other persons using 
its facilities.
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    \17\ 15 U.S.C. 78f(b).
    \18\ 15 U.S.C. 78f(b)(5).
    \19\ Id.
    \20\ 15 U.S.C. 78f(b)(4)
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    As described above, the Exchange operates in a highly competitive 
market in which market participants can readily direct order flow to 
competing venues if they deem fee levels at a particular venue to be 
excessive or incentives to be insufficient. The Exchange believes that 
its proposal to modify Remove Volume Tiers 1-2 reflects a competitive 
pricing structure designed to incentivize market participants to direct 
their order flow to the Exchange, which the Exchange believes would 
enhance market quality to the benefit of all Members. Additionally, the 
Exchange notes that relative volume-based incentives and discounts have 
been widely adopted by exchanges,\21\ including the Exchange,\22\ and 
are reasonable, equitable and non-discriminatory because they are open 
to all Members on an equal basis and provide additional benefits or 
discounts that are reasonably related to (i) the value to an exchange's 
market quality and (ii) associated higher levels of market activity, 
such as higher levels of liquidity provision and/or growth patterns. 
Competing equity exchanges offer similar tiered pricing structures, 
including schedules of rebates and fees that apply based upon members 
achieving certain volume and/or growth thresholds, as well as assess 
similar fees or rebates for similar types of orders, to that of the 
Exchange.
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    \21\ See e.g., BYX Equities Fee Schedule, Footnote 1, Add/Remove 
Volume Tiers.
    \22\ See e.g., EDGA Equities Fee Schedule, Fee Codes 3 and 6.
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    In particular, the Exchange believes its proposal to modify Remove 
Volume Tiers 1-2 is reasonable because the tiers will be available to 
all Members and provide all Members with an opportunity to receive an 
enhanced rebate. The Exchange further believes that modified Remove 
Volume Tiers 1 and 2 will provide a reasonable means to encourage 
adding displayed orders in Members' order flow to the Exchange and to 
incentivize Members to continue to provide volume to the Exchange by 
offering them an additional opportunity to receive an enhanced rebate 
on qualifying orders. An overall increase in activity would deepen the 
Exchange's liquidity pool, offers additional cost savings, support the 
quality of price discovery, promote market transparency and improve 
market quality, for all investors.
    In addition, the Exchange believes that its proposal to increase 
the fee associated with fee code DQ is reasonable, equitable, and 
consistent with the Act because such change is designed to decrease the 
Exchange's expenditures with respect to transaction pricing in order to 
offset some of the costs associated with the Exchange's current pricing 
structure, which assesses various fees for liquidity-adding orders and 
provides various rebates for liquidity-removing orders, and the 
Exchange's operations generally, in a manner that is consistent with 
the Exchange's overall pricing philosophy of encouraging added 
liquidity. The proposed higher fee ($0.0018 per share in securities 
priced at or above $1.00) is reasonable and appropriate because it 
represents only a modest increase from the current fee ($0.0015 per 
share) and remains competitive with, and generally lower than, other 
fees assessed for liquidity-adding orders on the Exchange. The Exchange 
further believes that the proposed increase to the fee associated with 
fee code DQ is not unfairly discriminatory because it applies to all 
Members equally, in that all Members will be assessed the higher fee 
upon appending an order with fee code DQ.
    The Exchange believes the proposed modified Remove Volume Tiers 1-2 
are reasonable as they do not represent a significant departure from 
the criteria currently offered in the Fee Schedule. The Exchange also 
believes that the proposal represents an equitable allocation of fees 
and rebates and is not unfairly discriminatory because all Members will 
be eligible for the new and revised tiers and have the opportunity to 
meet the tiers' criteria and receive the corresponding reduced fee or 
enhanced rebate if such criteria are met. Without having a view of 
activity on other markets and off-exchange venues, the Exchange has no 
way of knowing whether these proposed rule changes would definitely 
result in any Members qualifying for the new proposed tiers. While the 
Exchange has no way of predicting with certainty how the proposed 
changes will impact Member activity, based on the prior months volume, 
the Exchange anticipates that at least six Members will be able to 
satisfy proposed Remove Volume Tier 1, and at least four Members will 
be able to satisfy proposed Remove Volume Tier 2. The Exchange also 
notes that the proposed changes will not adversely impact any Member's 
ability to qualify for reduced fees or enhanced rebates offered under 
other tiers. Should a Member not meet the proposed new criteria, the 
Member will merely not receive that corresponding enhanced rebate.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. Rather, as discussed above, 
the Exchange believes that the proposed changes would encourage the 
submission of additional order flow to a public exchange, thereby 
promoting market depth, execution incentives and enhanced execution 
opportunities, as well as price discovery and transparency for all 
Members. As a result, the Exchange believes that the proposed changes 
further the Commission's goal in adopting Regulation NMS of fostering 
competition among orders, which promotes ``more efficient pricing of 
individual stocks for all types of orders, large and small.''
    The Exchange believes the proposed rule changes do not impose any 
burden on intramarket competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. Particularly, the proposed 
changes to Remove Volume Tiers 1 and 2 will apply to all Members 
equally in that all Members are eligible for each of the Tiers, have a 
reasonable opportunity to meet the Tiers' criteria and will receive the 
enhanced rebate on their qualifying orders if such criteria are met. 
The Exchange does not believe the proposed changes burden competition, 
but rather, enhance competition as they are intended to increase the 
competitiveness of EDGA by adopting a new pricing incentive and 
amending existing pricing incentives in order to attract order flow and 
incentivize participants to increase their participation on the 
Exchange, providing for additional execution opportunities for market 
participants and improved price transparency. Greater overall order 
flow, trading opportunities, and pricing transparency benefits all 
market participants on the Exchange by enhancing market quality and 
continuing to encourage Members to send orders, thereby contributing 
towards a robust and well-balanced market ecosystem.

[[Page 13131]]

    Further, the Exchange believes the proposed increased fee 
associated with fee code DQ does not impose any burden on intramarket 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act. The proposed fees associated with fee code DQ 
would apply to all Members equally in that all Members would be subject 
to the same fee for the execution of an MDO with a QDP instruction that 
adds liquidity to the Exchange. Both MDO and the associated QDP 
instruction are available to all Members on an equal and non-
discriminatory basis. As a result, any Member can decide to use (or not 
use) the QDP instruction based on the benefits provided by that 
instruction in potentially avoiding unfavorable executions, and the 
associated charge that the Exchange proposes to amend.
    Next, the Exchange believes the proposed rule changes does not 
impose any burden on intermarket competition that is not necessary or 
appropriate in furtherance of the purposes of the Act. As previously 
discussed, the Exchange operates in a highly competitive market. 
Members have numerous alternative venues that they may participate on 
and direct their order flow, including other equities exchanges, off-
exchange venues, and alternative trading systems. Additionally, the 
Exchange represents a small percentage of the overall market. Based on 
publicly available information, no single equities exchange has more 
than 13% of the market share.\23\ Therefore, no exchange possesses 
significant pricing power in the execution of order flow. Indeed, 
participants can readily choose to send their orders to other exchange 
and off-exchange venues if they deem fee levels at those other venues 
to be more favorable. Moreover, the Commission has repeatedly expressed 
its preference for competition over regulatory intervention in 
determining prices, products, and services in the securities markets. 
Specifically, in Regulation NMS, the Commission highlighted the 
importance of market forces in determining prices and SRO revenues and, 
also, recognized that current regulation of the market system ``has 
been remarkably successful in promoting market competition in its 
broader forms that are most important to investors and listed 
companies.'' \24\ The fact that this market is competitive has also 
long been recognized by the courts. In NetCoalition v. Securities and 
Exchange Commission, the D.C. Circuit stated as follows: ``[n]o one 
disputes that competition for order flow is `fierce.' . . . As the SEC 
explained, `[i]n the U.S. national market system, buyers and sellers of 
securities, and the broker-dealers that act as their order-routing 
agents, have a wide range of choices of where to route orders for 
execution'; [and] `no exchange can afford to take its market share 
percentages for granted' because `no exchange possesses a monopoly, 
regulatory or otherwise, in the execution of order flow from broker 
dealers' . . . .''.\25\ Accordingly, the Exchange does not believe its 
proposed fee change imposes any burden on competition that is not 
necessary or appropriate in furtherance of the purposes of the Act.
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    \23\ Supra note 3.
    \24\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005).
    \25\ NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. Cir. 2010) 
(quoting Securities Exchange Act Release No. 59039 (December 2, 
2008), 73 FR 74770, 74782-83 (December 9, 2008) (SR-NYSEArca-2006-
21)).
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C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    The Exchange neither solicited nor received comments on the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act \26\ and paragraph (f) of Rule 19b-4 \27\ 
thereunder. At any time within 60 days of the filing of the proposed 
rule change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission will institute proceedings to 
determine whether the proposed rule change should be approved or 
disapproved.
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    \26\ 15 U.S.C. 78s(b)(3)(A).
    \27\ 17 CFR 240.19b-4(f).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

    <bullet> Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
    <bullet> Send an email to <a href="/cdn-cgi/l/email-protection#7301061f165e101c1e1e161d0700330016105d141c05"><span class="__cf_email__" data-cfemail="91e3e4fdf4bcf2fefcfcf4ffe5e2d1e2f4f2bff6fee7">[email protected]</span></a>. Please include 
file number SR-CboeEDGA-2024-005 on the subject line.

Paper Comments

    <bullet> Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to file number SR-CboeEDGA-2024-005. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for website viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE, 
Washington, DC 20549, on official business days between the hours of 10 
a.m. and 3 p.m. Copies of the filing also will be available for 
inspection and copying at the principal office of the Exchange. Do not 
include personal identifiable information in submissions; you should 
submit only information that you wish to make available publicly. We 
may redact in part or withhold entirely from publication submitted 
material that is obscene or subject to copyright protection. All 
submissions should refer to file number SR-CboeEDGA-2024-005 and should 
be submitted on or before March 13, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\28\
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    \28\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-03454 Filed 2-20-24; 8:45 am]
BILLING CODE 8011-01-P


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